Question 1

The cash flow approach involves a calculation with a number of steps, starting with the pre- interest profits. Which of the following steps would you take first?

Accepted Answer

A)  Take away capital expenditure on fixed assets 
B)  Take away interest payments 
C)  Discount back to the present 
D)  Add depreciation 
A)  Take away capital expenditure on fixed assets 
B)  Take away interest payments 
C)  Discount back to the present 
D)  Add depreciation

Question 2

Which three of the following could contribute to increases in current working capital, as calculated as part of a cash flow approach?

Accepted Answer

A)  Rise in cash requirements 
B)  Rise in future earnings 
C)  Rise in stocks 
D)  Rise in debtors 
A)  Rise in cash requirements 
B)  Rise in future earnings 
C)  Rise in stocks 
D)  Rise in debtors

Question 3

Which three of the following are the most useful pointers when calculating g?

Accepted Answer

A)  Focus on the firm 
B)  Focus on the economy 
C)  Evaluate strategy 
D)  Evaluate the dividend yield 
A)  Focus on the firm 
B)  Focus on the economy 
C)  Evaluate strategy 
D)  Evaluate the dividend yield

Question 4

Which three of the following are reasons for the valuation of unquoted shares being different from the valuation of quoted shares?

Accepted Answer

A)  The shares may be subject to more risk. 
B)  The shares always have 'golden handcuffs' and 'earn- out clauses'. 
C)  There may be a lower quality and quantity of information. 
D)  The shares are less liquid. 
A)  The shares may be subject to more risk. 
B)  The shares always have 'golden handcuffs' and 'earn- out clauses'. 
C)  There may be a lower quality and quantity of information. 
D)  The shares are less liquid.

Question 5

Which three areas are shareholders of firms in financial difficulty most likely to focus on?

Accepted Answer

A)  The break- up value 
B)  The potential for asset sales 
C)  Ways of revaluing future cash flows 
D)  The potential for asset- backed borrowing 
A)  The break- up value 
B)  The potential for asset sales 
C)  Ways of revaluing future cash flows 
D)  The potential for asset- backed borrowing

Question 6

Which three of the following are included in a calculation of net asset value?

Accepted Answer

A)  Long- term and short- term creditors 
B)  Share value 
C)  Stocks, cash and other liquid assets 
D)  Fixed assets 
A)  Long- term and short- term creditors 
B)  Share value 
C)  Stocks, cash and other liquid assets 
D)  Fixed assets

Question 7

Which two of the following are most likely to influence kE ?

Accepted Answer

A)  The proportion of profits retained 
B)  Adopting a new strategy 
C)  An increase in inflation 
D)  Changing the payout ratio 
A)  The proportion of profits retained 
B)  Adopting a new strategy 
C)  An increase in inflation 
D)  Changing the payout ratio

Question 8

What is meant by 'golden handcuffs'?

Accepted Answer

A)  Financial incentives to encourage managers to stay with the firm 
B)  Financial incentives to encourage shareholders to stay with the firm 
C)  Contractual factors that force effective managers to stay with the firm 
D)  Financial incentives to encourage suppliers to stay with the firm 
A)  Financial incentives to encourage managers to stay with the firm 
B)  Financial incentives to encourage shareholders to stay with the firm 
C)  Contractual factors that force effective managers to stay with the firm 
D)  Financial incentives to encourage suppliers to stay with the firm

Question 9

A firm expects to pay dividends of 50p per year to infinity. The rate of return on a share in this risk class is 15 per cent. What is the value of the share to the investor?

Accepted Answer

A)  666p 
B)  333p 
C)  200p 
D)  400p 
A)  666p 
B)  333p 
C)  200p 
D)  400p

The cash flow approach involves a calculation with a number of steps, starting with the pre- interest profits. Which of the following steps would you take first?

Which three of the following could contribute to increases in current working capital, as calculated as part of a cash flow approach?

Which three of the following are the most useful pointers when calculating g?

Which three of the following are reasons for the valuation of unquoted shares being different from the valuation of quoted shares?

Which three areas are shareholders of firms in financial difficulty most likely to focus on?

Which three of the following are included in a calculation of net asset value?

Which two of the following are most likely to influence kE ?

What is meant by 'golden handcuffs'?

A firm expects to pay dividends of 50p per year to infinity. The rate of return on a share in this risk class is 15 per cent. What is the value of the share to the investor?

The Financial World

Project Appraisal: Net Present Value and Internal Rate of Return

Project Appraisal: Cash Flow and Applications

The Decision-Making Process for Investment Appraisal

Project Appraisal: Capital Rationing, Taxation and Inflation

Risk and Project Appraisal

Portfolio Theory

The Capital Asset Pricing Model and Multi-Factor Models

Stock Markets

Raising Equity Capital

Long-Term Debt Finance

Short-Term and Medium-Term Finance

Stock Market Efficiency

Value-Based Management

Value-Creation Metrics

The Cost of Capital

Valuing Shares

Capital Structure

Dividend Policy

Derivatives

Managing Exchange-Rate Risk

Future Value of 1 at Compound Interest

Present Value of 1 at Compound Interest

Present Value of an Annuity of 1 at Compound Interest

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Exam 20: Mergers

The cash flow approach involves a calculation with a number of steps, starting with the pre- interest profits. Which of the following steps would you take first?

Which three of the following could contribute to increases in current working capital, as calculated as part of a cash flow approach?

Which three of the following are the most useful pointers when calculating g?

Which three of the following are reasons for the valuation of unquoted shares being different from the valuation of quoted shares?

Which three areas are shareholders of firms in financial difficulty most likely to focus on?

Which three of the following are included in a calculation of net asset value?

Which two of the following are most likely to influence kE ?

What is meant by 'golden handcuffs'?

A firm expects to pay dividends of 50p per year to infinity. The rate of return on a share in this risk class is 15 per cent. What is the value of the share to the investor?

The Financial World

Project Appraisal: Net Present Value and Internal Rate of Return

Project Appraisal: Cash Flow and Applications

The Decision-Making Process for Investment Appraisal

Project Appraisal: Capital Rationing, Taxation and Inflation

Risk and Project Appraisal

Portfolio Theory

The Capital Asset Pricing Model and Multi-Factor Models

Stock Markets

Raising Equity Capital

Long-Term Debt Finance

Short-Term and Medium-Term Finance

Stock Market Efficiency

Value-Based Management

Value-Creation Metrics

The Cost of Capital

Valuing Shares

Capital Structure

Dividend Policy

Derivatives

Managing Exchange-Rate Risk

Future Value of 1 at Compound Interest

Present Value of 1 at Compound Interest

Present Value of an Annuity of 1 at Compound Interest

Filters